Obamacare has made young people lazier -- but that's not necessarily a bad thing

Under the Affordable Care Act, young adults are allowed to stay on their parents’ health insurance up to age 26. Since people generally like the idea of helping their own children avoid sickness and financial ruin, this has been one of the law’s more popular features. But how exactly has the rule changed life for American twentysomethings?
According to one new study, it seems to have given them a bit more leeway to bum around and find themselves — which is just about what you’d expect to happen when getting a job isn’t a prerequisite for getting insurance. In a working paper released earlier this month, economists Gregory Colman and Dhaval Dave conclude that thanks to Obamacare’s coverage rules, young adults are now less likely to work but a bit more personally content, as they spend more time with friends, in school, and searching for (presumably) fulfilling employment. They might be a little lazier. But that’s not necessarily such a bad thing.

A number of previous studies have found that letting twentysomethings remain on their parents’ health plans reduced their uninsured rates by about 4 or 5 percentage points and led them to work fewer hours. Colman and Dave’s paper is an interesting addition to the conversation because it both looks at how millennials have used their extra free time and what the changes have done for them emotionally.

Here’s how the researchers go about it. Based on data from the American Time Use Survey, they compare how 19-to-25-year-olds changed their work and leisure habits after the ACA went into effect with the way 27-to-34-year olds changed their behaviour.

Since the younger group was affected by Obamacare’s rule change while the older group was not, the researchers argue that differences between them should show the influence of the health law. To make sure other variables aren’t effecting their findings, they also adjust their calculations to control for factors like demographics, socioeconomic status, and the peculiarities of individual states.

Ultimately, they find that the health care law led to a roughly 5 percentage point drop in employment among the under-26 crowd. (Among those who worked, there wasn’t a statistically significant change in hours on the job.) What did the unemployed do with themselves? For one, some headed back to school. Among all 19-to-25 year-olds, time spent on education went up, though the change was both smaller and statistically insignificant among those ages 23 to 25.

Other than that, “Most of the freed-up time from the reduction in labour supply (at least 50% or so) is reallocated into socialising and relaxing,” Colman and Dave write. The group also devoted more time to searching for jobs and interviewing.

“The main takeaway is that Obamacare allowed young adults who perhaps weren’t in the job they wanted to be to either look for the job they wanted or perhaps go back to school,” Colman, who is a professor at Pace University in New York, told me.1 Another possible interpretation: Safe in the warm embrace of their parents’ health insurance, young folks who had trouble finding work after graduation were more willing to shop around for a job they actually wanted, rather than rushing into the first soul-crushing 9-to-5 gig that came along.

This all seems to have left them a bit more at ease with the world. After health reform, young adults were relatively more likely to report feeling that they were doing something meaningful with their time and that they generally felt happy.

So Obamacare has made finding a job slightly less urgent for your typical kid out of college or high school, while giving him or her a little more time to grab a beer with friends and look around for a reasonably satisfying career opportunity. That pretty much mirrors what the law is expected to do for older Americans as well.

Early last year, you may recall, the Congressional Budget Office predicted that the health reform law would lead Americans to work fewer hours, as some men and women discovered they could either find affordable health coverage through the individual market, or with the help of Mum and Dad. The reaction to that largely split among left-right lines, with conservatives noting that a decline in labour force participation would probably dampen economic growth somewhat, and liberals pointing out that the ACA was giving Americans the freedom to leave crappy jobs they were only staying in for the insurance.

Which is more important? The answer is going to hinge on what you think the point of public policy is. If you believe the government’s one and only goal should be to encourage GDP growth for the sake of GDP growth, then any change that encourages fewer people to work is probably going to rub you the wrong way.

But if you think the most important aim of government is to help people lead happy, healthy, satisfied lives, then giving them the option to laze around or figure out their lives without having to worry about a devastating hospital bill is probably the way to go.

1 Technical note about causality: During our chat, I asked Colman why he and Dave were so sure the sudden surge in free time among younger millennials was due to Obamacare, and not the fact that the aftermath of the Great Recession was a bit harsher on teens and early twentysomethings than it was on those closer to 30. First, he said, before the ACA, the trends in how the two age groups spent their time were fairly similar. After the ACA, the trends diverged, which strongly hints that the law had something to do with it. Second, though this bit didn’t actually make it into their paper, he said they tested all of their models while controlling for state unemployment rates divided by age, and it didn’t make a difference in their findings.